ABMB: A Big Jolt!

Results Update

For QE30/6/2019, Alliance Bank Malaysia Bhd ("ABMB")'s net profit dropped 31% q-o-q or 44% y-o-y to RM77 million. The sharp drop in profits was mainly due to expected credit losses stemming from the impairment of a few large accounts amounting to RM74.9 million, and the continued investment in IT infrastructure to support the Group’s Transformation initiatives.


Table: ABMB's last 8 quarterly results


Graph: ABMB's last 24 quarterly results

Valuation

ABMB (closed at RM2.92 today) is now trading at a trailing PER of 9.4x (based on last 4 quarters' EPS of 30.9 sen) or at a Price to book value of 0.8 time (based on net assets per share of RM3.69). At these multiples, ABMB is deemed fairly valued.

Technical Outlook

ABMB broke below its long-term uptrend line, SS at RM3.70 in May this year. Today, it broke below the psychological support at RM3.00. Its next support is at the horizontal line at RM2.75.

  
Chart: ABMB's weekly chart as at Aug 27, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on the weaker financial performance and the bearish technical outlook, ABMB is a stock to be treated with caution for the next few days or weeks. However, if the share price can form a base, it can be a good stock to consider for recovery play. It is a well-managed niche bank trading at fairly undemanding multiples after this sharp drop.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.